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The Forum > Article Comments > Key influences on the financial markets outlook for 2007 > Comments

Key influences on the financial markets outlook for 2007 : Comments

By Saul Eslake, published 12/1/2007

2007 may not be a 'bad' year but there won’t be many easy pickings.

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Dr. Eslake,

As an economist you would have had extensive training in mathematics, which would have included exponential functions. Let's use population as an example, although the same applies to growth in consumption of any material commodity. dP/dt = rP, in other words, growth in population numbers is proportional to population, with r the fractional (percentage) growth rate. With a population of 100 and an annual growth rate of 1% you would have 101 people at the end of the year and 101,000 if you started with 100,000. The solution to this equation (as can be confirmed by any differential equations textbook) is P(t) = P(0)exp(rt), where P(t) is the population at time t since some arbitrary starting point when the population is P(0).

Now lets assume that there was a population of 2 people 10,000 years ago and that it continued growing at 1% per year up to the present. This is less than current Australian and global growth rates (1.3%). A little work with a scientific calculator shows that we would now have a global population of about 5.4 x 10^43 people. The density of human flesh is about 1000 kg/m^3, the same as water, so assuming 60 kg per person, if all those people were packed into a sphere centered at the sun, the radius would extend 92 billion kilometers, more than 10 times as far as Pluto at its furthest from the sun. There is no imaginable technology that would make this possible.

Staying closer to home, we can check the CIA World Factbook for populations, land areas, and growth rates of different countries, then work out the time to standing room only for each of then. a little over 400 years for the Solomon Islands, assuming present growth rates.

You are arguing with the laws of mathematics, not Malthus, although Haiti and Rwanda are pretty good arguments that he was correct.

Your idea of exterminating other lifeforms to turn our beautiful planet into a factory farm for people fills me with horror.
Posted by Divergence, Monday, 15 January 2007 4:01:04 AM
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Divergence ,
“then work out the time to standing room only for each of then. a little over 400 years for the Solomon Islands, assuming present growth rates.”

You need to think outside of your (middle class) square:

You have left Australia out of your calculations.
When faced with the inevitable collapse of Solomon Islands( & others) The UN & others will simply arrange for them to transmigrate to Australia.

Haven’t you been told that we are responsible for such problems through our contribution to global warming etc.

And take a look around you -we have such extravagance lifestyle .
We have the Royal National Park to the south of Sydney which can house by third world standards a city of 1 million…we have Kuring-gai to the north & even the botanical gardens -all could be used to alleviate human suffering & feed & house the needy.

I’ll bet you, Tim Costello is already writing his speeches, & Bono & Peter Garrett have already penned a few songs to remind us of our debt to the new arrivals.
Posted by Horus, Monday, 15 January 2007 5:50:04 AM
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I took up "Thermoman"'s suggestion and read tDr Bartlett's lecture. Though it's well put together and his mathematics is unimpeachable, it amounts to little more than an elegant re-statement of Malthus.

Undeniably, if the world's population continues to grow at a constant rate then the world will, at some point, 'run out' of various things.

However, the world's population is not growing at a constant rate. According to the UN's World Population Projections (see http://esa.un.org/unpp/), global population growth peaked at just over 2% pa during the 1960s, has slowed to 1.3% pa over the decade ended 2005, and will slow further (on the UN's "Median Variant" projection) to 0.42% pa over the decade ended 2050.

Why is it slowing? Because of greater material affluence (in almost all cultures, the richer people get, the fewer children they have); because of advances in health care - in particular, declining infant mortality (the more confident people are that the children they have will survive, the fewer they have); and because of improvements in the education and status of women (the more educated and empowered a woman is, the fewer children she has).

Second, Bartlett makes no allowance for the signalling function of markets. In general, as things (land, oil, other resources) becomes more scarce, their prices rise - unless governments intervene to prevent market forces from operating. Higher prices prompt people to economize on their use of, to find new sources of, and to find alternatives to, the things which are becoming scarcer.

There is an important exception to this generalization - and that is where markets do not (for a variety of reasons) - assign a price to something which is becoming scarce. Examples include clean air, biodiversity, etc. In these circumstances - which economists call 'market failure' - there is a perfectly legitimate role for government intervention to assign a price to those things (for example through taxes). Contrary to the image which some people have of economists as heartless, uncaring types, most economists (including this one) support goverment interventions of this nature.
Posted by Saul Eslake, Monday, 15 January 2007 11:27:09 AM
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Saul,
"However, the world's population is not growing at a constant rate. According to the UN's World Population Projections (see http://esa.un.org/unpp/), global population growth peaked at just over 2% pa during the 1960s, has slowed to 1.3% pa over the decade ended 2005, and will slow further (on the UN's "Median Variant" projection) to 0.42% pa over the decade ended 2050."

The above is a bit misleading. What is occuring could be better characterised as a REDISTRIBUTION of population.While much of western of Europe & Japan -who could most sustain population increase- is experiencing zero to negative pop. growth (Russia for example is LOOSING 800,000 each year). Many centres in the third world -who can least afford population growth - eg Yemen are growing at 3%+ pa.

And its not as benigh as the UN figures initailly suggest.
Even in good times this carries with it major economic & social costs -especially for Europe.But factor in climate change & you have big problems -for everyone (except of course those in that growth industry -refugee resettlement).
Posted by Horus, Tuesday, 16 January 2007 1:42:21 AM
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'Horus', if the population of countries which have above-average rates of resource use (Western countries, in general, though this category would also include Russia and China) is growing at a slower rate than that of countries which have below-average rates of resource use, then surely that further weakens the argument that the world as a whole is about to 'run out' of resources.
Posted by Saul Eslake, Tuesday, 16 January 2007 5:31:40 AM
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Dear Saul Eslake

I'm very pleased that you took the time to look up the venerable Dr Bartlett. I do believe that you might have misrepresented him a little - I don't think he proposed that current rates of growth would continue unabated - in fact he stated quite clearly that they would not, because they cannot. He did say that unless population growth slows by means of smaller families, the alternatives would all be unpleasant - war, famine, disease etc.

Your argument about price signals is the standard response of the economics profession. It is correct, in the short term, and we will see it in operation soon as the price of oil goes through the roof. However it just means that once one resource becomes scarce, we will turn to another until they all run out. The cupboard only has so many shelves in it, even if you only clear them out one by one.

Can I just ask you to conduct the following thought exercise - supposing the deomgraphic transition you (quite rightly) say happens as countries become prosperous, women educated etc.. supposing such a transition had occurred globally in 1955 when the population was only 2.5 billion? Don't you think the world would be a more pleasant place to live in? Perhaps we would not have 25,000 people a day dying of starvation, as we do now. Perhaps we would not yet have climate change - perhaps our resources would not have such pressure on them. Perhaps there would not be such glaring inequity between poor and wealthy. Same for fish stocks, land clearing, forests, biodiversity, water etc. I say perhaps because the species is so peverse that it might well find things to fight about anyway.

The current water "shortage" that will find us drinking recycled sewage is, if you look at the other side of the coin, just a result of more and more people demanding a scarce resource. Wouldn't it make more sense to stop the population growth, rather than having to try to deal with its consequences all the time?

Regards
Posted by Thermoman, Wednesday, 31 January 2007 10:02:00 PM
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